The Voice of the White House

Washington , D.C. , February 24, 2008 : “Politics is now all the vogue in the American press. It doesn’t matter if the economy is going to hell in a hand basket, we all get to hear the latest thrilling news about the Oscars, JayLo’s babies, the latest Spears craziness, and, of course, Hillary and Obama dukeing it out in Texas. The money here is on Obama. He has outfought, out organized and out talked Hillary. I have met her and while she is very smart, she is a mean, conniving and establishment-bought and paid for witch. She hates men,  is very sharp and totally a sell-out. But the thing that shocks me is the elevation of John McCain to the Republican presidential nominee. Inside the Beltway, McCain is known to be going over the edge mentally (see the Green Zone Follies below, ed.) and just another sleazy politician on the take. John is coasting on his “war record” which really has been overblown but mentally, he is losing it. Everybody on the Hill also knew about Mark Foley and his frantic lustings after underage Congressional male pages but no one ever opened their mouths until after he was outed. Look, Mommy, at what the Republicans have wrought! Fruits and nuts!”

Green Zone Follies

Baghdad , 20 Feb 08, “There is nothing new here to report. The troops are clearing out one nest of patriots only to have them move down the road. The DoD is fudging on the death tolls and they never mention the lunatics, the drug use or the semi-mutinous grunts, the constant attacks on the Green Zone with mortars and rockets and so on, and on. I am considered useful so I get to stay here. At least I get good food and relative safety unlike the foot troops. Now, the nutty Cheney wants to hive off more troops to invade Pakistan to help out their vanishing dictator. Never happen, Dick. And here is just a personal vignette of an experience I and my psychologist buddy had with the Republican probable nominee, Senator McCain. He came here, as you might know, to “inspect the situation.” Jesus, what a farce! There he was, walking around a marketplace with more armed guards than Bush has, and wearing a huge bullet-proof vest. Anyway, after he “inspected” the market, he came to the Green Zone for some rigged conference with the lying generals. My buddy and I were going to visit another friend when we saw guards, etc, in front of a rec room door. Curious, we went into another unguarded room, opened several doors and guess what? There was the Senator all by himself, sitting on a folding chair by a card table. We were a little awed so I said ‘Hello, Senator. Sorry to bother you.” He looked at us like we were cows and kept blinking. Finally, he smiled and said, ‘Hey, there, soldiers! How is it going? Is it going good?” and my friend the shrink said, “Why yes, Senator. Everything is great!” And McCain smiled at nothing and looked around the room.

“Well…I’m glad to hear it. You are the General?” And I said, a little sarcastically, “Why no, Senator, not quite yet.” And he looked at me like I was a sheep or something, smiling s silly smile. “Oh” he said to the table, “Let’s hope it gets a little cooler here. Have you been here long?” My friend said, “Too long Senator.” “Why that’s good, General,” the Senator replied to the ceiling. Then his lips moved but he said nothing. He looked up and smiled. My wife’s grandfather did just that. And the Senator may have been sitting right near us but believe me, he was somewhere else. Then he began a conversation with someone who wasn’t there and my friend took my arm and said, “I think we should get the hell out of here,” and we started to go back the way we came when some civilian came in. “It’s time to go to the meeting, John,” but McCain just smiled and kept on talking to the table. The civilian said, “All right, gentlemen, time to go. The Senator is very tired and has jet lag.” And when we left, the Senator was talking complete nonsense. Later, one of the staff personnel told both of us that the Senator had “a little accident” and he had to change his pants. Jesus H. Christ! This nut is going to be a President? My friend, who is a pro, said he was very obviously suffering from pre-Alzheimer’s and believe me, although I am not trained,  this one was a pure space case. They must know this. I guess they give him a shot of something before he gets out in public but if you  saw him with a vacant stare, talking to himself, you would not have to be a professional shrink to know that putting this pathetic man into the Oval Office would be a worse mistake than putting Bush in. At least as far as we know, Bush doesn’t talk to the walls and wet himself.”

SECRECY NEWS

from the FAS Project on Government Secrecy

Volume 2008, Issue No. 20

February 25, 2008

ARMY WILL RESTORE ACCESS TO ONLINE LIBRARY WITHIN 2 WEEKS

"We fully intend to put the Reimer Digital Library back to where the public can access the unclassified documents," wrote U.S. Army Major General Tony Cucolo in an email message to Secrecy News.

http://www.fas.org/sgp/news/2008/02/reimer.html

Public access to the online library of U.S. Army publications has been blocked since February 6, when a system security upgrade was installed. In response, the Federation of American Scientists filed a Freedom of Information Act request seeking release of the entire contents of the library for republication on the FAS web site. (Secrecy News, Feb. 13).

"We underestimated the impact of blocking public access," wrote Col. Michael J. Negard on February 22. "Our intent was to protect sensitive information, the server itself, and the network from attacks by outside sources, not to deny the public access to publicly releasable information."

"We absolutely respect and value our freedom of information and the American people's 'right to know'," he wrote.

"TRADOC [U.S. Army Training and Doctrine Command] is currently working to restore public access to unclassified and releasable information."

"We expect this to be completed within two weeks," Col. Negard indicated.

The Washington Post, whose coverage helped elevate the issue and expedite its resolution, reported the latest developments in "Army Says It Will Restore Public Access to Online Library" by Christopher Lee, February 23:

http://www.washingtonpost.com/wp-dyn/content/article/2008/02/22/AR2008022202773.html

"THE DARK BUSH LEGACY ON SECRECY"

The leading presidential candidates should be questioned about their willingness to depart from the secrecy practices that have characterized the Bush Administration, wrote civil libertarian Nat Hentoff in his syndicated column this week.

Whether it concerns domestic surveillance, coercive interrogation, or extraordinary rendition, "I haven't heard any of the frontrunners stress this need for a clean break with the Bush administration's use of a 'unitary executive' doctrine to cloak these and other extrajudicial -- and indeed extralegal -- practices in deep secrecy," Mr. Hentoff wrote.

See "The Dark Bush Legacy on Secrecy" by Nat Hentoff , Washington Times, February 25:

http://washingtontimes.com/article/20080225/EDITORIAL07/183894758/1013/editorial

The article followed up on a related piece that I wrote for the Nieman Watchdog earlier this month, "The Next President Should Open Up the Bush Administration's Record":

http://www.niemanwatchdog.org/index.cfm?fuseaction=ask_this.view&askthisid=00321

SENATE TO HOLD HEARING ON GAO AND INTELLIGENCE OVERSIGHT

The simplest, most effective and most achievable way to improve congressional oversight of intelligence might be to utilize the Government Accountability Office to audit and evaluate intelligence  programs, a prospect that is opposed by the Director of National Intelligence.

The Senate Homeland Security and Governmental Affairs Committee will hold a hearing on Friday, February 29 to consider pending legislation that would bolster GAO's role in intelligence oversight. The Federation of American Scientists will be represented among the witnesses.

http://hsgac.senate.gov/index.cfm?Fuseaction=Hearings.Detail&HearingID=526

"The need for more effective oversight and accountability of our intelligence community has never been greater," said Senator Daniel Akaka (D-HI) last year. "Yet the ability of Congress to ensure that the intelligence community has sufficient resources and capability of performing its mission has never been more in question." (Secrecy News, Oct. 3, 2007 ).

Bush's broken promises hit war vets

February 24, 2008

PressTV

US President George W. Bush sparks an outcry after breaking promises to grant citizenship to the immigrant members of the US military.

According to the New York Times, the Department of Defense and the Citizenship and Immigration Services are refusing to consider pending citizenship applications of more than 7,200 service members.

"If what I have done for this country is not enough for me to be a citizen, then I don't know what is," said former Marine Abdool Habibullah, a Guyanese immigrant who has been waiting for a citizenship since he returned from Iraq in 2005.

“I've pretty much given up on finding out where my paperwork is, what's gone wrong, what happened to it,” he added.

After the September 11 attacks, Bush signed an administrative order which allowed non-citizens on active duty to apply for citizenship. The broken promises have infuriated migratory affairs lawyers and congressional officials.

“These are men and women who are risking their lives for us,” said Democrat Sen. for New York Charles Schumer.

“They've met all the requirements for citizenship, they have certainly proved their commitment to our country, and yet they could lose their lives while waiting for a bureaucratic snafu to untangle,” he concluded.

http://www.presstv.ir/detail.aspx?id=44548&sectionid=3510203

Oil price breaks through $100 a barrel

February 20, 2008

by Stephen Foley,

The Independent,

Oil prices surged to an unprecedented high in late trading yesterday, settling above $100 a barrel and prompting a new round of concern about the effect of high fuel costs on the health of the global economy.

A rush of speculative buying pushed the price of crude up 5 per cent, on a heady cocktail of fear for supplies, belligerent noises from the Opec oil producing cartel, and the falling dollar. Analysts believe that Opec is unlikely to increase production to alleviate the upward pressure on prices when it meets on 5 March, despite recent overtures from Western leaders including US president George Bush.

"Opec should maintain production or cut production," Venezuela's oil minister Rafael Ramirez said yesterday, echoing comments made by Opec President Chakib Khelil on Monday.

Other cartel officials said it would be hard to justify a reduction in supplies at current price levels, despite expectations that demand will dip seasonally as the Northern Hemisphere winter comes to an end.

Venezuela is locked in a legal tussle with the US firm ExxonMobil, the world's largest oil company, over the nationalisation of its assets in the country. Courts in the US and Britain have frozen assets belonging to the Venezuelan state oil company, and tensions are running high.

Oil prices first touched $100 a barrel on 2 January, when a single trader purchased oil futures at a triple digit price, but the price receded, only to creep higher in the past month, in part because the currency in which oil is traded, the US dollar, has fallen in value.

Adding to concerns yesterday, a rumour swept trading floors that Henry Okah, a rebel leader in Nig-eria's oil delta, had been killed, foreshadowing growing unrest there – although that was later denied by the country's government news agency. Traders also blamed news of a fire at a Texas oil refinery for adding to fears of supply disruptions and increasing pressure on prices.

"It was just a matter of time before we were going over $100," said Tom Bentz of BNP Paribas. "We had a correction to $86, but it's on a straight run right back up ever since. There are enough issues out there to keep things rolling."

Share prices took a tumble after the oil price breached the $100 landmark, giving up early gains amid concern about the effect of high fuel costs on business profits and on already weak consumer spending. A US government survey showed that prices at the pump had soared back past $3 per gallon in the past week.

Big oil's enemy within

February 20, 2008

by Terry Macalister,

The Guardian

The ultimate threat to big oil comes not from green campaigners - but its own shareholders

Business leaders are now pleading with governments for regulation. When did that last happen? Executives usually hate anything that interferes with their freedom of movement. But climate change appears to have changed all that.

We really have arrived at a point where the world of commerce - not all of it of course - is frightened of global warming because of the risks and uncertainty it brings. Uncertainty is the thing that business hates more than anything.

So now we have more and more executives calling on politicians to bring in some kind of global order that will allow them to operate on a level playing field, as they like to call it.

A coalition of 40 institutional investors, holding $1.75tn worth of funds, has just demanded that US Congress introduce a mandatory policy to reduce national greenhouse gases to as little as 10% of 1990 levels.

Admittedly the timescale they envisage is not until 2050, but it's still a huge step forward. Not only that, but they want the Wall Street financial regulator to force companies to own up to their carbon exposure, and would like to see more analysts taking account of carbon in their analyses of balance sheet risks.

It's all good stuff, except the dear old oil industry seems content to go its own sweet way. Shell briefed in recent days about the dangers of energy insecurity, stressing that the increasing demand for global energy means we need tar sands as well as wind power. And the new BP boss, Tony Hayward, has recently reversed company policy and bought in to Canada 's dirty tar sands business too.

But even if the politicians are slow on their feet, the noose is beginning to tighten on big oil. The threat, then, is not coming externally yet - but from the "enemy within": the oil companies' own shareholders.

Less Money, More Pain:The Bonfire of Capital

February 22, 2008

by Mike Whitney

Counterpunch

The credit storm which began in July when two Bear Stearns hedge funds were forced to liquidate, has continued to intensify. Last week the noose tightened around auction-rate securities, a little-known part of the market that requires short-term funding to set rates for long-term municipal bonds. The $330 billion ARS market has dried up overnight pushing up rates as high as 20 per cent on some bonds — a new benchmark for short term debt. Auction-rate securities are now headed for extinction just like the other previously-vital parts of the structured finance paradigm.

The $2 trillion market for collateralized debt obligations (CDOs), the multi-trillion dollar mortgage-backed securities market (MBSs) and the $1.3 asset-backed commercial paper (ABCP) market have all shut down draining a small ocean of capital from the financial system and pushing many of the banks and hedge funds closer to default.

The price of insuring corporate bonds has skyrocketed in the last few weeks, making it more difficult for businesses to get the funding they need to expand or continue present operations. Much of this has to do with the growing uncertainty about the reliability of credit default swaps, a $45 trillion dollar market which remains virtually unregulated. Credit-default swaps are a type of financial instrument that are used to speculate on a company's ability to repay debt. They pay the buyer face value in exchange for the underlying securities or the cash equivalent if a borrower fails to adhere to its debt agreements. When the price of CDSs increases, it means that there is greater doubt about the quality of the bond. Prices are presently soaring because the entire structured finance market — and everything connected to it-is under withering attack from the meltdown in subprime mortgages. As foreclosures continue to rise, the subprime loans that were transformed into securities will continue to unwind, destroying trillions of dollars of virtual-capital in the secondary market.

It all sounds more complicated than it really is. Imagine a 200 ft. conveyor belt with two burly workers and a mountain-sized pile of money on one end, and a towering bonfire on the other. Every time a home goes into foreclosure; the two workers stack the money that was lost on the transaction, plus all of the cash that was leveraged on the home via "securitization" and derivatives, onto the conveyor-belt where it is fed into the fire. That is precisely what is happening right now and the amount of capital that is being consumed by the flames far exceeds the Fed's paltry increases to the money supply or Bush's projected $168 billion "surplus package". Capital is being sucked out of the system faster than it can be replaced which is apparent by the sudden cramping in the financial system and a more generalized slowdown in consumer spending.

According to a recent Bloomberg article:

"A year ago $20 million would have gotten Luminent Mortgage Capital Inc. access to $640 million in loans to buy top-rated mortgage-backed securities. Now that much cash gets the firm no more than $80 million. ... (Only) 6 lenders are offering 5 times leverage, while a year ago, 20 banks extended 33 times."

The banks are not providing anywhere near as much money for leveraged investments as they did just last year. And, when credit shrinks on a national scale — as it is — so does the economy. It' a simple formula; less money means less economic activity, less growth, fewer jobs, tighter budgets and more pain.

Bloomberg continues:

"Wall Street firms, reeling from $146 billion in losses on their debt holdings, are fueling a credit crisis by clamping down on lending to investors and hedge funds that use borrowed money to buy securities. By pulling back, (the banks) are contributing to reduced demand and lower prices throughout the fixed-income world."

The banks are in no position to be generous because they're already saddled with $400 billion in MBSs and CDOs---as well as another $170 billion in private equity deals — for which there is currently no market. They've had to dramatically cut back on their lending because they either don't have the resources or are facing bankruptcy in the near future.

An article which appeared on the front page of the Financial Times last week, illustrates how hard-pressed the banks really are:

" US banks have been quietly borrowing massive amounts of money from the Federal Reserve...$50 billion in one month."

The Fed's new Term Auction Facility "allows the banks to borrow money against all sort of dodgy collateral," says Christopher Wood, analyst at CLSA. "The banks are increasingly giving the Fed the garbage collateral nobody else wants to take ... this suggests a perilous condition for America 's banking system."

The move has sparked unease among some analysts about the stress developing in opaque corners of the US banking system and the banks' growing reliance on indirect forms of government support." ("US Banks borrow $50 billion via New Fed Facility", Financial Times) (The story appeared nowhere in the US media)

At the same time the banks are getting backdoor injections of liquidity from the Fed. Banking giant Citigroup has been trying to off-load some of its branches so it can cover its structured investment losses. It all looks rather desperate, but scouring the planet for capital to shore up flagging balance sheets is turning out to be a full-time job for many of America's largest investment banks. It is the only way they can stay one step ahead of the hangman.

In the last few days, gold has spiked to $950, a new high, while oil futures passed the $100 per barrel mark.  The battered greenback has already taken a beating, and yet, Fed chairman Bernanke is signaling that there are more rate cuts to come. The prospect of a global run on the dollar has never been greater. Still, Bernanke will do whatever he can to resuscitate the faltering banking system, even if he destroys the currency in the process. Unfortunately, interest rates alone won't cut it. The banks need capital; and fast. Meanwhile, the waning dollar has sent food and energy prices soaring which is leaving consumers without the discretionary income they need for anything beyond the basic necessities. As a result, retail sales are down and employers are forced to lay off workers to reduce their spending. This is all part of the self-reinforcing negative-feedback loop that begins with falling home prices and then rumbles through the broader economy. There is no chance that the economy will rebound until housing prices stabilize and the rate of foreclosures returns to normal. But that could be a long way off. With housing inventory at historic highs and mortgage applications at new lows, the economy could keep somersaulting down the stairwell for a good two years or more. Only then, will we hit rock-bottom.

The country is now headed into a deep and protracted recession. Low interest credit and financial innovation have paralyzed the credit markets while inflating a monstrous equity bubble that is wreaking havoc with the world's financial system. The new market architecture, "structured finance", has collapsed under the stress of falling asset-values and rising defaults. Many of the banks are technically insolvent already, drowning in their own red ink. Public confidence in the nations' financial institutions has never been lower. Monetary policy and deregulation have failed. The system is self-destructing.

Now that the credit crunch has rendered the markets dysfunctional, spokesmen for the investor class are speaking out and confirming what many have suspected from the very beginning; that the present troubles originated at the Federal Reserve and, ultimately, that's where the responsibility lies. In an article in the Wall Street Journal this week, Harvard economics professor and former Council of Economic Advisers under President Reagan, Martin Feldstein, made this candid admission:

"There is plenty of blame to go around for the current situation. The Federal Reserve bears much of the responsibility, because of its failure to provide the appropriate supervisory oversight for the major money center banks. The Fed's banking examiners have complete access to all of the financial transactions of the banks that they supervise, and should have the technical expertise to evaluate the risks that those banks are taking. Because these banks provide credit to the nonbank financial institutions, the Fed can also indirectly examine what those other institutions are doing.

The Fed's bank examinations are supposed to assess the adequacy of each bank's capital and the quality of its assets. The Fed declared that the banks had adequate capital because it gave far too little weight to their massive off balance-sheet positions — the structured investment vehicles (SIVs), conduits and credit line obligations---that the banks have now been forced to bring onto their balance sheets. Examiners also overstated the quality of the banks' assets, failing to allow for the potential bursting of the house price bubble. The implication of this for Fed supervision policy is clear. The way out of the current crisis is not."

How odd. So, when all else fails; tell the truth?

But Feldstein is right; the Fed refused to perform its oversight duties because its friends in the banking industry were raking in vast profits selling sketchy, subprime junk to gullible investors around the world. They knew about the "massive off balance-sheet positions" which allowed the banks' to create mortgage-backed securities and CDOs without sufficient capital reserves. They knew it all; every last bit of it, which simply proves that the Federal Reserve is an organization which serves the exclusive interests of the banking establishment and their corporate brethren in the financial industry.

Surprised?

The upcoming global recession/depression will give us plenty of time to mull over the ruinous effects of Fed policy and to devise a plan for abolishing the Federal Reserve once and for all. That is, if they don't destroy us first.

Mike Whitney lives in Washington state. He can be reached at fergiewhitney@msn.com.

http://www.counterpunch.org/whitney02222008.html

Protocols For Economic Collapse In America

February 23, 2008

by Al Martin

http://www.almartinraw.com/

"Everybody knows that the dice are loaded. Everybody rolls with their fingers crossed. Everybody knows the war is over. Everybody knows the good guys lost. Everybody knows the fight was fixed. The poor stay poor, the rich get rich. That's how it goes, Everybody knows" - Leonard Cohen

And this is how the U.S. Treasury would handle an economic collapse. It's called the 6900 series of protocols. It would start with declaring a force majeure, which would immediately be interpreted by the marketplaces as a de facto repudiation of debt. Then the SEC and the various regulatory exchanges would anticipate the market's decline, hour by hour — when Japan's markets opened the next day, what would happen when the European markets, and all the inter- linkages of the global markets. On the second day, US Special Forces would be dropped in by parachute in the cities where the twelve Federal Reserve district banks are located.

The origin of these protocols comes from the Department of Defense. This is contingency planning for a variety of post-collapse scenarios. Those scenarios would include, obviously, military collapse, World War III, in other words, and its aftermath. What we're talking about now is aftermath — how the aftermath would be handled.

One does not necessarily know how the events would transpire that would cause the collapse, whether it's military collapse or economic collapse. In World War III, it would become obvious — when the mushroom cloud started to appear over cities.

Economic collapse scenarios were always premised on the basis of a US declaration of force majeure on debt service. It's a very extensive scenario. The scenarios are all together, i.e., military, economic, political and social complete destabilization leading to collapse. Then they break down individual scenarios. In the economic collapse scenario, the starting point would be the United States Treasury declaring a force majeure on debt service, which is de facto repudiation, and that's how it would be interpreted by the world's capital marketplaces. Then the scenario goes on from there. The US Treasury would obviously declare a force majeure sometime after the European markets had settled down. In other words, they had gone out on the day, which means 11:38 a.m. EDT , our time. They'd wait until the European markets closed, and the US markets had been open for a couple of hours. That's when they'd determine how to begin the process of unwinding or controlling the collapse to the best extent possible, mainly because they know that the greatest hedge pressure would be people seeking to use other markets to hedge their long exposure in the United States and that the US would be the biggest seller in all the rest of the world's markets. Therefore you would want to declare the force majeure when the rest of the world's markets closed. The declaration of force majeure would be precipitated by the declaration that the United States is no longer able to service its debt. That's pretty simple. Who makes that decision? The Treasury Department. The President does not make that decision. The Secretary of the Treasury does. He has that authority. You might ask — wouldn't he have his arm twisted not to do that?

The answer is that if there isn't any money left to service the debt, it doesn't make any difference what the current regime might want to do.

The day of reckoning is now coming. What has happened in the interim, from 2001 to present, is dynamic, global economic deterioration. The economic deterioration visited upon the United States by Bushonomics is not a localized event. It is, in fact, global. We have a planet now that is sinking into a sea of red ink.

The United States is consuming 80% of the planet's savings rate to finance its debt. The central banks of Germany , Japan and Saudi Arabia are no longer the powerhouses they used to be. Their reserves have now been substantially depleted. They can, therefore, no longer hide the fact that they own a certain number, likely in the trillions of dollars, of U.S. Treasury debt that isn't being serviced, because they can't hide it through bookkeeping tricks anymore because their reserves are so depleted.

Therefore somebody has covertly been putting demands on the Bush- Cheney regime for payment. Why do you think 2900 metric tons of gold is depleted from U.S. inventory since March of `01?

Why do you think that $2 billion in currency seized from Iraq last May is now unaccounted for?

Someone is putting demands on the Bush-Cheney regime. Someone is saying to the Bushonian Cabal that — You've got to start servicing this debt because we, foreign central banks, are in nations - European and Asian - whose reserves are now nearly exhausted.

Who could be putting that kind of pressure on them?

It has to be coming from whoever is organizing this thing at the very top, which I would tend to think has got to be most likely a cabal of people that would involve Henry Kissinger, James Baker, George Schultz, possibly William Simon. It would be somebody at the very top that is familiar with how to do this. It would have to be someone familiar with finances.

So would this be one faction of a cabal blackmailing or forcing another faction? No, it's not really blackmailing. It's being done out of desperation. The German, Japanese and Saudi central banks are saying to the Bushonian cabal, You've got to start servicing this debt because we don't have the reserves to cover you anymore. We can no longer make it appear that the debt is being serviced because our own reserves are so substantively depleted. Therefore you must begin to cover this debt. If you don't, then, at some point, we will have to publicly admit in order to save our own necks — that we were the end buyers of a lot of stealth debt, a lot of debt that your Treasury issued illegally and has never serviced. That would then expose the whole cabal.

The Kissinger-Baker faction are at the top of how this was done on the economic side of the equation. They were not the original insiders so much, but the managers of the conspiracy from the U.S. Treasury, to wit, the U.S. Treasury and Federal Reserve role-play the part.

Take Henry Kissinger. It may not have occurred to anyone why in the last 3 years Henry Kissinger has been back in Washington more than he has in the last 30 years. And why are all these quiet meetings in Washington with alleged senior Bush-Cheney regime officials, as foreign news services endlessly put it. It's because Kissinger is the point man. He's the one that is telling them the disposition of other foreign central banks.

Kissinger would probably also be involved in transfer or hypothecation of any assets from the cabal. In other words, they're being stolen from the American people by the Bush-Cheney regime and the Bushonian Cabal, and they are being used to hypothecate, transfer, service, or otherwise carry this debt held by certain foreign central banks.

The process of unraveling has already begun because of ever-spiraling Bushonian budget deficits. The Bush-Cheney regime, even in its overt policies (now they're overt political, economic, social and military policies) is generating $600-billion-plus deficit per year, which is consuming 80% of the planet's net savings rate.

It doesn't have the slack. In other words, it can't refinance stealth debt by issuing more stealth debt anymore. Nor can they bleed money out of the system like they could in the 1980s by hiding it when the overt policies of the Bush-Cheney regime are already producing a budget deficit of 6% of Gross Domestic Product. There is no other mechanism that they could use anymore to hide expansion of debt that could be used to service said stealth debt, and they are, frankly, running out of assets that they can steal from the American people.

So the proverbial day of reckoning is coming. The Bush-Cheney regime (and I give them credit for this) are telling the American people what's coming, knowing the American people are too stupid to understand. They are telling the American people about the re- institution of the Gold Confiscation Act and the sudden scrapping of the Treasury's emergency post-collapse gold note scheme to maintain domestic liquidity.

David Walker, US Comptroller General and chief of the GAO has said that should the Bush-Cheney regime be re-ensconced into power and, hence, the scourge of Bushonomics persist, that the United States could no longer service its debt beyond 2009. They're not hiding it from anybody anymore. They are telling you what's happening. Now, what does that mean? The key is in what Walker is saying when he says the debt can no longer be serviced. I've been asked this on the radio shows. People have noticed what Walker said because he's out in the news more often than he used to be. It's unusual for the Comptroller General of the United States , which is a rather arcane position, to be out in the news so much.

It simply means that when he says the United States will no longer be able to sustain Bushonian budget deficits, he means that by 2009, if Bush-Cheney have a second term in office, the United States will be consuming 100% of the planet's savings rate to finance Bushonian budget deficits.

Therefore, if the planet can no longer generate any more liquidity to lend to the United States, one of three things have to happen: A) There has to be a sudden and dramatic reduction in federal spending. There are only two places that can come from. There would have to be an immediate $100-billion cut in defense spending, which would end any hopes the Republicans had of getting into office for years to come because it would destroy any confidence the NFWCs (Naïve Flag Waving Crowd) had in them. Or you would have to scrap the multi-trillion- dollar Bushonian tax cuts for the Republican rich, something that's equally unpalatable.

The other option, B, as Paul O'Neill mentioned, is a dramatic increase in the rate of federal income taxation from the current nominal rate of 28% to 65%, which is what the Treasury Department estimated would be required post-2009 to provide the U.S. Treasury with sufficient revenues to continue to service debt.

The third option, or C, becomes the declaration of a force majeure on credit service of U.S. Treasury debt by the United States Treasury, which is tantamount and would be accurately construed as de facto debt repudiation by the United States of America .

There are other signs to look for. They're not going to happen now, but if Bush-Cheney is re-elected, you'll begin to see more signs that the end is coming. I know a lot of people may disagree, but you wait and see. If Bush-Cheney has a second term, see if they do not institute some currency expatriation control. See if that doesn't come in the way Nixon tried it in May-June of 1971.

In the second term, there will be some sort of currency expatriation control in the United States , but there will also be loopholes that will allow the large money to escape. The restrictions will apply to the 10- and 20-thousand-dollar people. It ain't going to apply to the 10- and 20-million-dollar people. It would be self-defeating to do that.

When that day comes, in other words, when the U.S. Treasury declares a force majeure on debt, it wouldn't be broad-cast on mainstream media. There's no sense because the American people don't even understand what it means. But the announcement would actually be put on the Federal Reserve wire system, which would, of course, immediately be picked up by all media outlets anyway.

The U.S. Treasury would declare a force majeure on debt after the Asian and European markets closed, probably at 12:30 p.m. EDT . The reason why that hour was always selected is because Asian and European markets close. It's also the lunch hour for the markets. It's when you're going to have the fewest people on the floor of the exchanges. That would be the ideal time to make such an announcement.

A few seconds after that announcement was made, all United States markets, both equities debt and commodities i.e., stock, bonds, commodities, that have trading collars or permissible daily limits would all be limit-offered with pools. Limit-offered means that there are more sellers at the limit i.e., limit down, than there are buyers.

So-called 'pools' would immediately begin to form, probably a thousand contracts every few minutes. 'Limit-offered with pools' - this is trader language. Pools to sell 2,000 lots, 3,000 lots. That means, the number of sellers over and above the available buyers at the limit- offered price. That would begin to build.

By 1:00 , the news would begin to sink in because it would take awhile before panic selling would arise from the public. This news is being released at lunch hour.

A lot of the American people initially would not even understand the temerity of the news. You would see  professional selling first, and as that professional selling intensified over the afternoon, the SEC, the CFTC, NASDAQ, and various market regulatory authorities would begin to institute certain emergency market protocols. This would be the installation of the so-called 'declaration of fast market conditions,' for instance; the declaration of 'no more stop orders,' the declaration of 'fill at any price,' etc. in a desperate bid to maintain liquidity.

That first day, the Dow Jones Industrial Average and related indices on a percentage basis would lose about 20% of their value by the close of business that day. The real impact would come overnight when the American people found out what this was all about and when it was explained to them.

At 7:30 a.m. EDT , the Tokyo markets would open, and no price would be affixed for probably three or four hours into the session due to the avalanche of selling. Once prices were established, the government of Japan would close all of its financial markets. Europe would not even open. All European governments would close all capital exchanges the next day.

The United States would, in order to accommodate global electronic trading, attempt to open the market on the second day, which they would do, regardless of price, just to maintain some liquidity. At the end of Day Two, the Dow Jones and related indices, would have lost two thirds of their value, and prices would be set accordingly.

On Day Three, the New York Stock Exchange, the SEC and other related agencies would recommend to the United States Treasury and the Federal Reserve that all markets be closed. That would be on the morning of Day Three. Eleven a.m. , the Federal Reserve would then order all domestic banks closed. All of the twelve Federal Reserve district banks would (30 minutes later) have special U.S. forces parachuted in and around them to secure whatever gold bullion reserves they had left.

Day Three, 9:00 p.m. , the President of the United States would declare a state of martial law. All financial transactions would come to an end. The Treasury would act to formally de-monetize the U.S. dollar and declare it worthless.

This would be totally unprecedented. In the past, collapses have been temporary and have been brought back up. But what we're talking about now is the end.

These protocols that I'm referring to aren't even all that secret. They were publicly available all through the Clinton era. These are Treasury protocols that were instituted mostly in the late 1970s when the Treasury and Federal Reserve began to feel that it was important to have an emergency-collapse protocol in place.

What precipitated the timing of this was the inflationary spiral of the late 1970s. The U.S. Treasury and the Federal Reserve were both concerned that this inflationary spiral, which was occurring not only domestically but globally, might lead to a global, uncontrollable hyper-inflation that the Federal Reserve or major central banks could not stop by traditional means, i.e., by raising interest rates and contracting money supply.

There was also the recognition, of course, that global central reserve bank bullion inventories had been so depleted over the previous 30 years that any re-institution of a species currency, even on a temporary basis, and even within a regional or individual nation-state basis, was no longer possible.

This is an analogy. In a military scenario, it's like the President of the United States pushing the final red button — the commit button. The Treasury Secretary of the United States has a similar mechanism. It's called the yellow button, the commit button. The Secretary of Defense has the same system. This is what happens. Computer program starts to institute these protocols. Imagine the complexity of trying the manage all this. I think it's going to happen all simultaneously. There are hundreds of different agencies involved, both domestically and internationally. In order to maintain liquidity for as long as possible, it has to be extremely well-coordinated, and there must be existing collapse protocols that can be used.

The reason I was familiar with them was because I used to see the U.S. Treasury 6900 Series Collapse Protocol, 6903, 6904 there'll be A, B, and so on which keyed in to the Department of Defense to be incorporated within the Department of Defense's own World War III scenario and various types of military/ political/ social instability/ war/ pestilence, chaos, etc. scenarios.

All federal agencies had individual collapse protocols that ultimately got coordinated through the Department of Defense. Obviously, the Department of Defense would be the ultimate coordinator because it would need to have special forces available, on a stand-by basis, ready, that could quickly parachute into areas all over the country, into the cities particularly, to secure federal properties and assets.

And that's literally how it would begin. By the end of the third day, it would be all over — a state of martial law. We're not talking about war, now; this is just economic collapse.

There's no military implication here, no political, no social implication or policy directive thereunto. This is strictly economic collapse. By the end of Day Three, effectively, all banks in the world will be shut down, all paper currencies will become valueless. Martial law would be declared. There would be no continuing transactions, at least for a period of time, of commodities. All providers of fuels and foods would be shut down automatically.

They have this in great detail too. U.S. Department of Defense Special 117th Assault Unit would parachute in to seize control of the cattle yards in Oklahoma City . This is how well it's planned. In other words, economic collapse would automatically involve expansive military action and control.

By the end of the third day, when you no longer have a domestic medium of exchange, you have to have  secured food and fuel stocks. You've got to have troops that have secured distribution points where there is food and fuel stocks, warehouses, tanks, etc. Otherwise people are just going to go get them, and the people have to know that if they try to go break into that store and steal that loaf of bread, they're going to be shot.

Protocols for environmental disasters are called 'scaling-circle scenarios.' 'Scaling circles' is a Department of Defense euphemism. It's also used in FEMA, OEM and other emergency management services. In environmental catastrophes, which are going to become national or global, it's got to start someplace. It's going to start in one very small, specific area. Therefore what happens is that the immediate force containment is the greatest in the first circle, to try to contain the spread of the disaster and keep it within that circle.

The environmental problem, to whatever extent it's possible, before it spreads, will be neutralized or mitigated, in order to keep that catastrophe within that circle, or, if it is likely that it is to escape that circle, to attack whatever it is in such a fashion as to mitigate its strength and its ability to contaminate or otherwise affect other areas.

In the case of earthquakes, for instance, affecting the west coast, beginning at Mt. Rainier and moving southward — that's a different type of scenario. That does not include as much Department of Defense involvement. It includes separate protocols, wherein mostly FEMA and OEM act as the senior coordinating agencies between municipal, county and state disaster and containment, which is called Disaster and Containment Units. Federal troops would only be brought in for the purposes of maintaining control.

In a military or economic collapse situation, National Guard units would provide any spare help they could in combating whatever the problem is. Federal troops would be used in order to have the specific authority simply to shoot anyone. There are plans for all sorts of scenarios. The economic-disaster scenario is the one I always found the most intriguing because it is the one that is least understood by the American people.

Military control would be necessary when lines begin to form at the banks, people trying to access their money. But that wasn't even anticipated as a big problem. Lines would form at the banks, but it was not even envisioned until sometime on Day Three because the American people wouldn't get it. It would be announced that the stock markets are down 2000 or 3000 points, and since we've always been taught they'll come back, the people would still be buying stocks.

You could count on everybody remaining in ignorance all the way down because the American people have never been taught Economics 101. The American people wouldn't realize the full extent of it until the markets were closed on the third day, or until the time when they went down to cash a check and the bank was closed with soldiers out in front. Then they would go down and see the gas station's closed. They see the local supermarket has been shuttered, and there's federal troops in front of it. Then they might begin to catch on. And remember — it's not just federal troops. In emergency-collapse protocols, even before the declaration of a formal state of emergency or a state of martial law, the local military authorities within any given county or jurisdiction have the ability to essentially militarize anyone, that is, any civilian. This would be more than just deputizing civilians. It's federal. In other words, they would have the ability to militarize and give military authority to a civilian force. This would include not only police and the sheriffs and state police, but all local law enforcement that exists below the state level would be immediately militarized. They wouldn't take just anybody like they did in Iraq . It would be like the military when they call for volunteers. Then they'd have everybody and their brother-in-law volunteering, waving around the American flag and so on.

You've got a lot of pickup-driving guys in this country with the gun racks in the back and the Confederate flag flying. So you start waving the American flag in front of their face and say, Hey, you're going to get your chance you always wanted — to fit your potbelly inside an army uniform and carry a gun and shoot people. How appealing would that be?

And besides, if you do this, then you're going to get to eat.

In other words, this is how it would unfold over three days, but, in fact, very few Americans would know what to do about it or how to take any precautions. They wouldn't have a clue because they don't understand enough about economics to know what is happening. So that's what it is — Economic Armageddon. If the Bush-Cheney regime is re- installed into power, that is effectively what Comptroller General David Walker is saying.

In conclusion, since there is very little the people of the United States can do to protect themselves. We're not going to make any suggestions of how to protect yourselves because there's very little you can do.

We could tell you to go out and buy gold coins and bury them in the coffee can in the back yard and go to your nearest survivalist store, but, frankly, that's useless. In the last analysis, it's a lot of hype. There is very little the average US citizen could do.

The only thing that can prevent this, as the Comptroller alluded to when he was asked by Barbara Walters, How do we prevent reaching the problem by 2009? He said simply, "A change of regimes."

So how do you prevent it? Don't vote for Bush and Cheney — and hope that Bush does not use his emergency powers to cancel or postpone the election by edict, powers which you, the flag-waving citizens, have given him.

All flag-waving citizens, be warned. If you want to vote for Bush- Cheney again, make sure you got plenty of Spam on hand.

Here's an interesting and humorous aside. A couple of days ago, Hormel Foods, which makes Spam, announced that in the last six months there have been record sales of Spam in the United States the survivalists' food of choice. After all, they pride themselves on the fact, as the spokesman for Hormel said, "It is the only food product you can buy with an expiration that's 50 years."

When everything goes to hell, when all that man has created has turned to dust again, the final legacy is going to be Spam. It will be the last surviving item — when the anthropologists of 20 thousand years from now are digging sites and they see these enormous mountains of unopened cans of Spam They'll have monuments to the past out of Spam.

So if Bush-Cheney has a second term in office, there will be some sort of currency restriction, like Nixon did in 1971. On April 13, 2004 , Deputy Assistant Treasury Secretary John Boine talked about potential currency restrictions. He used the word that's going to fuel the flames of the survivalist and gloom-and-doom collapse people.

It's very, very telling that the U.S. Treasury may institute a restriction on the amount of U.S. dollars that can be converted into gold.

Furthermore, he intimated (and I suspected that this was coming, although this wouldn't actually become law until Bush-Cheney was in office for second term one way or another) that the Bush-Cheney regime determines that the Gold Confiscation Act gives to Treasury the power for so-called forced disclosure of gold holdings.

I'm not quite sure of the language of the Gold Confiscation Act from 1933. It just says, "compelled", as in citizens are lawfully compelled to redeem gold for script. I don't think there was any such provision, which he was inferring that there is. That was FDR's "Raw Deal" of 1934, when people were coerced into giving up their gold. But nowhere in this act does it specifically authorize the Treasury to mandate citizens to report their gold holdings. So if this gets any press at all, particularly within the circles of gold bugs and so on, watch out.

Furthermore, on Washington Journal they were talking about how FEMA has recommended to the Office of Homeland Security to have increased restrictions regarding citizen hoarding of long-term food and fuel supplies. That's pretty sinister too.

What they're talking about is the purchase of long-term so-called stores of survival food. FEMA was talking about some sort of restriction preventing people from accumulating food stores; putting it simply, that's what it means. The second point was to increase restrictions that already exist.

FEMA was recommending even tighter restrictions on citizens building their own private property underground storage tanks for the purposes of long-term storage of fuel. The real intent of this is is threefold: a) to restrict citizens' ability to hoard food; b) restrict citizens' ability to hoard long-term storage of fuel; c) the forced identification of citizens to reveal food and fuel stocks they may be hoarding.

And that, in my opinion, is the real essence. The Bush-Cheney regime was scared of having the FEMA angle put into the equation because they knew what it means and how people would interpret it.

They have tried to use environmental legislation to restrict people's ability to build fuel storage facilities on their own property — to get around what the true intent of that was.

But the bigger picture is that if you start to limit citizens' ability to hoard fuel and food and shake them up by potential forced identification of gold holdings or forced redemption.

In other words, what you don't want is citizens who have the ability to store a lot of food and fuel and to own gold because they would be able to resist state control in the future.

You've got to have every citizen on a rationing card to control the civilian population. You can't have citizens out there hoarding food and fuel because then people can say to government,"I ain't taking a rationing card, baby, with my national ID card. I don't have to. You can't control me through food and fuel and ever-worthless paper currency."

I used to make fun of these people. But now, things have come full circle on this debate. The Bush-Cheney regime is making it increasingly clear through their small changes in policy. Not a lot of people monitor these decisions, but I do. And the pattern is becoming increasingly clear.

In fact, I would believe that those of the survivalist mentality (the food, fuel, the gold coins in the coffee can in the back yard) people who think that way will be ultimately vindicated - if George Bush has a second term in office.

People should quit making fun of them because they would be vindicated - even though they were all burned out, twenty-dollared to death, buying books and tapes, and discredited by mainstream media. It may sound like a hollow victory, but it won't be a hollow victory for them - them that's got the Spam...

Why Wall Street rescues are failing

The financial system has become dependent on debt and the transfer of risk via convoluted debt instruments, creating a mess that will require hundreds of billions of dollars and global cooperation to fix.

February 25, 2008

by Jon Markman

MSN Money

Since the wheels started coming off the stock market last summer, investors have looked to at least seven white knights to end the distress with a bold stroke.

Yet each, including Federal Reserve Chairman Ben Bernanke and U.S. superinvestor Warren Buffett, has failed to lift investors' spirits for more than a couple of weeks, ultimately leaving stocks to tumble ever lower. Why?

The fundamental problem in the world economy is that it grew over the past two decades to be incredibly reliant on optimistic risk takers' willingness to accept increasingly complex IOUs from companies, banks and government institutions as investments instead of real assets. Now we are seeing the same movie play back in reverse, as massive investor losses in debts once believed to be safe have led to falling confidence, rising pessimism and extreme risk avoidance.

In a gentler era, debt was important but not as vital to world finance. In recent years, debt became the oxygen of the world financial system, along with a fanciful means of transferring its risks from borrowers and issuers to investors. To the extent that neither debt nor its conveyances are now trusted, even from organizations once considered rock-solid, the entire global banking system is asphyxiating before our eyes.

The first symptoms appeared in subprime-mortgage debts and seemed to be confined to the faltering U.S. home-construction industry. Then we learned that mortgages had been "securitized" and thus had become a problem for brokerages that issued and traded them. Next it turned out that banks held warehouses full of these securities and would suffer large losses.

Then it turned out that these damaged credits had been used as collateral for further bank loans, amplifying losses as margin calls demanded selling at deteriorating prices. Then we learned that not just banks but also corporations, states and cities had created and traded their own versions of the convoluted debt instruments and risk-transfer mechanisms that once seemed so promising. And in turn we learned about the troubled $45 trillion market for insurance on all of these credits.

The threat of the obscure

Now, with our antennae up, virtually every week we discover a new large but obscure corner of the U.S. and world financial system that -- unknown to all but a few practitioners -- depends on the confidence of debt buyers in order to survive. And they are all today gasping for breath.

Take, for instance, the obscure tender-option-bond programs or auction-rate securities that I wrote about in my past two columns. These lightly regulated, trillion-dollar financing programs underpin our civic infrastructure, and their possible failure seriously threatens the health of our cities, hospitals and transportation networks.

We are not quite talking about a terminal illness here, but close enough. This slow-motion asphyxiation is worse than a flu or pneumonia, and it's more resistant to treatment than cancer. And that's why the problems besetting the market are not solvable by conventional fiscal or monetary policy changes, political gestures or mere tens of billions of dollars in new investments.

To breathe a meaningful amount of new oxygen into the financial system, and thus effect a lasting reversal in the fortunes of major banks and stocks, experts now believe will require hundreds of billions of dollars just as a baseline. Plus we'll need to see a restoration of confidence in dishonored regulatory bodies, bank execs and ratings agencies, and quite possibly wholesale changes in the way financial companies are governed and managed worldwide. For all that, add the most precious commodity of all: time.

Until U.S. , European and Asian central banks, investors and governments can coordinate a solution on an unprecedented scale, all interim white knights are doomed to fail. With them will go every minor stock market rally such as the one that kicked off at the start of this week.

Let's catalog the knights that have been eagerly anticipated and then failed so far:

·                    Bernanke and his power to lower interest rates. Cheaper money hasn't worked; banks are hoarding it by raising loan requirements.

·                    Buffett and his power to buy distressed banks and insurers. He's interested in only the most valuable casualties, leaving the worst and most dangerous institutions to dangle from nooses.

·                    Sovereign wealth funds and their ability to inject $10 billion-plus at a shot into battered banks. They're no smarter than the average investor, just larger. Even their sizable efforts so far amount to little more than a drop in the proverbial bucket, and they face mounting criticism and resistance at home.

·                    Treasury Secretary Henry Paulson and his ability to force bankers to the table. Every smart private businessperson who has entered the Bush administration has failed once inside; Paulson's winter program to rescue banks' structured investment vehicles went nowhere.

·                    Congress and its ability to write tax-rebate checks. The prospect of a $160 billion injection into the U.S. economy, amounting to 1% of gross domestic product, boosted stocks for little more than two weeks. The sugar high is over.